Answer to Question #275617 in Economics of Enterprise for Bibou

Question

A firm has a total production cost of $200,000. Its average fixed cost is $120 and its average variable

cost is $80. Calculate the firm’s total fixed costs.

Answer 1

Solution

Total Production Cost $=TC=$ $$200,000$

Average Fixed Cost $=AFC=$ $$120$

Average Variable Cost $=AVC=$ $$80$

Quantity $=q$

$TC=(AFC+AVC)*q$

$200,000=(120+80)*q$

$200,000=200q$

$q=$ 1,000 units

The firm’s total fixed costs(TFC):

$TFC=AFC*q$

$=$ $$120*1,000$

$=$ $$120,000$

Thus, the firm's total fixed costs is $120,000